British pharmaceuticals giant AstraZeneca has snapped up a stake in Neil Woodford and Novartis-backed Mereo Biopharma as part of a deal to sell the commercial rights of a new product.
Mereo, which is listed on London's Alternative Investment Market (Aim), will receive an exclusive licence, including an option to acquire a treatment called AZD9668 being developed for a debilitating genetic disease that causes lung problems.
The company will initially pay $3m (£2m) in cash plus 490,798 new ordinary shares. Additional payments may be made if certain milestones are met, like the completion and success of new studies.
"We will continue to divest or out-license deprioritized assets where we believe it will help accelerate the development of new medicines," said Kumar Srinivasan, vice president of scientific partnering and alliances at AstraZeneca.
Denise Scots-Knight, chief executive of Mereo Biopharma said:
We are delighted to have closed this agreement with AstraZeneca for AZD9668 in furtherance of our stated strategy of building a portfolio of products focussed on rare and speciality diseases.
The structure of this license and option agreement allows us to complete the phase II study with our existing resources before triggering additional payments to acquire the asset outright.
As part of this agreement, we also welcome AstraZeneca as another large pharma shareholder in the company, alongside Novartis.